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Sozzi's Retail Roundup: Starbucks Still Needs To Adjust To Customer Demand

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On Wednesday, Brian Sozzi, CEO and Chief Equities Strategist at Belus Capital Advisors dropped by on February 5 to Benzinga's PreMarket show to discuss retailers.

Everyone who loves a cup of coffee has at some point likely visited a Starbucks (NASDAQ: SBUX) locations. Sozzi recognizes that Starbucks has grown tremendously over the years, but the company has hit a rough patch recently.

“The Starbucks was a tough call, it was our 2013 top call everything seemed to go right,” Sozzi told Benzinga. “On January 13th, we downgraded to Hold, and still have a Hold rating with price target of $73.”

“Watching the stores, you are seeing longer lines, I have seen people leaving the line because the line is too big. The menu has just enlarged to the point where they need to improve the process behind the counter.”

Related: Sozzi's Retail Roundup: Radio Shack Abuzz After Super Bowl, But Still Struggling

While some may acknowledge that long lines are a sign of a strong pent up demand for Starbucks products, there is tremendous pressure from Wall Street for Starbucks to sell massive amounts of coffee each and every quarter.

“We talked to the company late last week, I still didn't get the sense that they get the problem. Given the fact they don't get it, I need to see how that plays out in the current quarter results and how much they are having to discount to get customers back in the stores.”

Sozzi referenced a slowing of traffic at Starbucks that was seen in mid-December. As a result, Starbucks had to increase its promotional activity around the holiday shopping season. “You are just not used to Starbucks promoting anything,” said Sozzi.

He said that his Hold rating was the result of more than two months of “investigative research” on the ground. Sozzi needs to see mall traffic improving, or signs that company is improving its process behind the counter before he can re-instate a Buy rating.

Posted-In: Belus Capital Advisors Brian SozziAnalyst Color News Retail Sales Analyst Ratings Best of Benzinga

 

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